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FCA consultation CP19-25 pension transfer advice

FCA consultation CP19/25: pension transfer advice including contingent charging

Background

  • CP19/25: Pension transfer advice: contingent charging and other proposed changes
  • Published by the FCA on 30 July 2019
  • This FCA Consultation Paper sets out its proposed measures to change how advisers manage and deliver pension transfer advice, particularly for defined benefit (DB) to defined contribution (DC) transfers. The FCA is consulting on banning contingent charging and making other changes to its rules and guidance.

Impacts

The government’s pension freedoms gave consumers with defined contribution (DC) pensions more flexibility in how and when they could access their pension savings. The government created a mandatory advice requirement to prevent members of defined benefit (DB) schemes transferring against their own best interests.

The FCA is concerned that too many advisers are delivering poor advice, much of it driven by conflicts of interest in the way they are remunerated. In particular, the practice of contingent charging creates an obvious conflict. This is where advisers only get paid if a transfer proceeds.

The FCA is consulting on the following proposals:

  • To ban contingent charging, except for groups of consumers with certain identifiable circumstances that mean a transfer is likely to be in their best interests.
  • Where contingent charging is permitted, advisers will have to charge the same amount, in monetary terms, for advice to transfer as they charge when the advice is non-contingent.
  • To introduce a short form of ’abridged’ advice that can result in a recommendation not to transfer based on a high-level assessment of a client’s circumstances. This will fall outside the proposed ban on contingent charging and should help maintain initial access to advice.

This consultation will be of interest to firms providing advice on pension transfers from DB to DC schemes.  This consultation will also be relevant to stakeholders with an interest in pensions and retirement income.  Consumers will also be affected by this consultation.

Timeline with relevant dates to be logged on regulatory calendar

  • Consultation opens on 30 July 2019
  • Consultation closes on 30 October 2019

Next steps

Respondents need to send comments to the FCA.

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